Business vs Public Models

“Or is running a local government like s business killing it?”

I had an interesting conversation at a conference recently. The people I was talking to were advanced in their careers and the discussion moved toward the outlook on management in public settings. Once upon a time, most public works and utility managers were civil engineers, but often they were criticized because they were focused on the engineering aspects as opposed to the people aspects of the community. Their focus was public health and making sure things operated correctly. Most did whatever was needed to accomplish that.

This led to schools of public administration, which actually started educating some of those same engineers about management of large public organizations, organizational theory, human resource, accounting and planning I did all that myself at UNC-Chapel Hill. The goal was to understand finances, people, community outreach, the need to engage citizens and as well as public service. The outcomes were providing good service. That however tends to cost a little more than operations although there are opportunities to be a bit entrepreneurial.

So back to the people in the conversation. They noted that sometime in the 1980s or early 1990s the MPAs were being replaced by MBAs as politicians were focusing on operating “like a business.” Looking at the MBAs out there, the comment was that business schools do not focus on service, but profits to shareholders, and the training is to cut unproductive pieces that detract from the bottom line. Hence investments do not get made if the payback is not immediate. Service is not a priority unless it helps the bottom line. In a monopoly (like a local government), there are no other option, so service becomes a lessor priority.

So it brought up an interesting, but unanswerable question for now: has the move to more business trained people in government created some of the ills we see? The discussion included the following questions/observations (summarized here):

Many water and sewer utilities are putting a lot of time and effort into customer service and outreach now after years of criticism for failing to communicate with customers. That appears symptomatic of the monopoly business model.

Our investments in infrastructure decreased significantly after 1980, and many business people focus on payback – so if the investment does not payback quickly, they do not pursue them. How does that impact infrastructure investments which rarely pay back quickly (Note that I have heard this argument from several utility directors with business backgrounds in very recent years, so the comments are not unfounded). It does beg the questions of whether the business focus compounds our current infrastructure problems.

Likewise maintenance often gets cut as budgets are matched to revenues as opposed to revenues matched to costs, another business principle. Run to failure is a business model, not a public sector model. Utilities can increase rates and we note that phones, cable television, and computer access have all increased in costs at a far faster rate that water and sewer utilities.

Interestingly though was the one business piece that was missing: Marketing the value of the product (which is different than customer service). Marketing water seems foreign to the business manager in the public sector. The question arising there is whether that is a political pressure as opposed to a forgotten part of the education.